enerteck_10q.htm

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PART I - FINANCIAL INFORMATION

Item 1.	Financial Statements.		3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.		13
Item 3.	Quantitative and Qualitative Disclosures About Market Risk.		25
Item 4.	Controls and Procedures.		25

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings.		26
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.		26
Item 3.	Default upon Senior Securities.		27
Item 4.	[Removed and Reserved.]		27
Item 5.	Other Information.		27
Item 6.	Exhibits.		28

SIGNATURES			29

	Unaudited			Audited
	September 30, 2011			Dec. 31, 2010
ASSETS

Current assets
Cash	$	68,842		$	123,526
Inventory		236,639			234,793
Receivables – Trade		309,542			199,660
Prepaid Expenses		22,500			11,570
Total current assets	$	637,523		$	569,549

Intellectual Property	$	150,000			150,000

Property and equipment, net of accumulated depreciation of $346,652 and $321,748, respectively		66,310			89,714
Total assets	$	853,833		$	809,263

LIAB. AND STOCKHOLDERS’ EQUITY (DEFICIT)

Current liabilities
Accounts payable	$	263,164		$	191,800
Shareholder loans and advances		525,000			322,510
Accrued Interest		149,569			67,900
Other Accrued liabilities		1,315,733			857,067
Total current liabilities	$	2,253,466		$	1,439,277

Long Term Liabilities
Notes Payable	$	705,568		$	1,020,833
Total Long Term Liabilities	$	705,568		$	1,020,833

Stockholders’ Equity (Deficit)
Preferred stock, $.001 par value, 10,000,000 shares authorized, none issued
Common stock, $.001 par value, 100,000,000 shares authorized, 22,519,683 and 21,982,616 shares
issued and outstanding, respectively		22,520			21,983
Additional paid-in capital		24,168,125			22,544,644
Accumulated deficit		(26,295,846	)		(24,217,474	)
Total stockholders’ equity		(2,105,201	)		(1,650,847	)

Total liabilities and stockholders’ equity (deficit)	$	853,833		$	809,263

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2011			2010			2011			2010

Revenues	$	31,164		$	33,307		$	77,943		$	225,415
Cost of goods sold		5,078			9,791			12,846			39,183
Gross profit	$	26,086		$	23,516		$	65,097		$	186,233

General and Administrative Expenses:
Wages	$	174,956		$	190,272		$	539,978		$	599,146
Non-cash compensation		657,114			0			1,096,918			0
Depreciation		8,402			10,371			24,904			31,113
Amortization		0			144,664			0			433,992
Other Selling, Gen. & Admin. Exp.		59,395			131,157			310,693			492,336
Total Expenses	$	899,867		$	476,464		$	1,972,493		$	1,556,587

Operating loss	$	(873,781	)	$	(452,948	)	$	(1,907,396	)	$	(1,370,355	)

Interest Income	$	2		$	12		$	16		$	22
Interest expense		(72,267	)		(22,869	)		(170,992	)		(50,321	)
Net Income (loss)	$	(946,046	)	$	(475,805	)	$	(2,078,372	)	$	(1,420,146	)

Net Loss per Share: Basic and diluted	$	(0.04	)	$	(0.02	)	$	(0.09	)	$	(.07	)

Weighted average shares outstanding:
Basic and diluted		22,418,164			21,982,616			22,256,756			21,842,411

	Sept. 30,			Sept. 30,
	2011			2010
Net (loss)	$	(2,078,372	)	$	(1,420,863	)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation and amortization	$	110,544			476,942
Common Stock, Warrants and Options for Services		1,096,918			0
Changes in operating assets and liabilities:
Accounts receivable		(109,882	)		46,431
Inventory		(1,846	)		(29,623	)
Prepaid expenses and other		(10,930	)		(7,304	)
Accounts payable		71,364			21,725
Accrued interest payable		81,833			11,777
Accrued Liabilities		462,187			430,099
NET CASH USED IN OPERATING ACTIVITIES	$	(378,184	)	$	(470,816	)

CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	$	(1,500	)	$	(832	)
Employee Advances					500
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES	$	(1,500	)	$	(332	)

CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of Common Stock	$	50,000		$	0
Proceeds of Stockholder Notes Payable and Advances		275,000			1,005,000
Payments on Intellectual Property		0			(500,000	)
CASH PROVIDED BY FINANCING ACTIVITIES	$	325,000		$	505,000

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	$	(54,684	)	$	33,852
Cash and cash equivalents, beginning of Quarter		123,526			52,129
Cash and cash equivalents, end of Quarter	$	68,842		$	85,981
Cash paid for:
Income tax	$	0		$	0
Interest	$	0		$	19,537

The accompanying Unaudited interim consolidated financial statements of EnerTeck Corporation have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission, and should be read in conjunction with the audited consolidated financial statements and notes thereto contained in EnerTeck’s Annual Report filed with the SEC on Form 10-K. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the consolidated financial statements which would substantially duplicate the disclosure contained in the audited consolidated financial statements for fiscal 2010 as reported in the Form 10-K have been omitted.

Diluted net income (loss) per common share is computed by dividing the net income applicable to common stockholders, adjusted on an "as if converted" basis, by the weighted average number of common shares outstanding plus potential dilutive securities. For 2011 and 2010, potential dilutive securities had an anti-dilutive effect and were not included in the calculation of diluted net loss per common share.

In July 2006, EnerTeck acquired the EnerBurn technology. The purchase price for the EnerBurn technology is as follows: (i) $1.0 million cash paid on July 13, 2006, and (ii) a promissory note for $2.0 million. In May of 2007, we made the initial payment of $500,000 plus interest against the loan. Prior to 2009 EnerTeck had determined that the life of the intellectual property was indefinite; therefore, the asset was not amortized. The Company tested its intangible assets for impairment as of December 31, 2008. As a result of an independent examination based on sales for the year ended December 31, 2008, the Company determined that an impairment of the asset in the amount of $825,000 was required to be recorded.

Management made the decision during 2009 to change the characterization of its intellectual property to a finite-lived asset and to amortize the remaining balance of its intangible assets to the nominal value of $150,000 by the end of 2012, due to its determination that this now represents the scheduled end of its exclusive registration during that period. As a result, amortization expense of approximately $579,000 and $579,000 was recorded for the years ended December 31, 2010 and 2009 respectively.

Management made the decision effective December 31, 2010 to record an additional impairment of the asset in the amount of $868,000 as a result of the Company’s inability to generate sufficient sales to support its previously recorded amount. This impairment adjustment results in a value of $150,000 being place on the Company's intellectual property, which management believes is adequately supported by existing levels of sales and market data. Management has further determined that no additional amortization will be taken from the remaining value of the intellectual property.

During the third quarter of 2009, options to acquire 64,200 shares were issued under our 2003 Stock Option Plan to five employees which options are immediately exercisable. These options have an exercise price of $0.55 per share and expire in five years from their issue date. These options were valued using the Black-Scholes Model and the fair value of $35,295 was charged to operations in the third quarter of 2009.

During the second quarter of 2011, the Board of Directors granted 1,000,000 and 100,000 warrants respectfully as future compensation for Mr. Thomas Donino and to Mr. Richard Dicks. These warrants were issued to replace the same number of warrants which expired in the fourth quarter of 2010. These warrants have an exercise price of $0.60 per share and will expire in May 2016. An additional 950,000 warrants with the same exercise price were also issued in the second quarter of 2011 to certain lenders as and for additional consideration for their loans to the Company which were made in 2010. During the third quarter of 2011, options to acquire 225,001 shares were issued under our 2003 Stock Option Plan to four employees with options are immediately exercisable. These options have an exercise price of $0.60 per share and expire in five years from their issue date.

During the third quarter of 2011, the Company granted 540,000 warrants to a director and his designee, 30,000 of which were issued in replacement of 30,000 warrants which expired in the second quarter of 2011 and 510,000 of which were issued in replacement of 510,000 warrants exercisable at $2.00 per share which were to expire in October 2012 and have been cancelled. All of the new warrants have an exercise price of $0.60 per share. An additional 250,000 warrants with the same exercise price were issued subsequent to the end of the second quarter of 2011 to such director and another officer/director of the Company as and for additional consideration for previous loans to the Company. Also, subsequent to the end of the second quarter of 2011, three of the four directors of the Company were each granted 250,000 warrants for services rendered which warrants are exercisable at $0.60 per share. All of the warrants have a term of five years.

On July 15, 2011, the Company entered into an Investment Agreement (the “Investment Agreement”) with Kodiak Capital Group, LLC (the “Investor”). The Investment Agreement provides the Company an equity line (the “Financing”) whereby the Company can issue and sell to the Investor, from time to time, shares of the Company’s common stock up to an aggregate purchase price of $4.0 million (the “Shares”). Under the Investment Agreement, the Company may not deliver the Put Notice until after the resale of the Shares has been registered pursuant to a registration statement filed with the Securities and Exchange Commission (the “SEC”). On August 30, 2011, the Company filed such registration statement. On September 19, 2011, and following the receipt of comments from the staff of the SEC, the Company filed a request for withdrawal of such registration statement because the SEC’s accommodation for equity line financing arrangements extends only to companies that are listed on a national securities exchange or quoted on the OTC Bulletin Board.

During the second quarter of 2009, we issued 1,600,000 shares of our common stock at $0.50 per share to five investors for total gross proceeds of $800,000 in a private placement offering to accredited investors only. An additional 700,000 shares, at $0.50 per share, were issued in the third quarter of 2009 to three other investors in connection with additional proceeds of $350,000 which had been advanced by such investors during the second quarter of 2009. An additional 60,000 shares, at $.50 per share, were issued in the second quarter of 2011 to one investor in connection with proceeds of $30,000 which had been advanced by such investor during the second quarter of 2009. On March 18, 2010 such investor signed the subscription agreement and was issued 60,000 shares of common stock in April 2011.

During the first quarter of 2011, we received an advance of $125,000 in gross proceeds for 250,000 shares of our common stock at $0.50 per share to three investors in a private placement offering to accredited investors only. Such shares have not been issued to date but will be issued in 2011. This amount has been reported in the shareholder loans and advances in the accompanying balance sheet pending completion of the subscription agreements.

On July 7, 2009, the Company entered into a $100,000 unsecured promissory note with an officer, due on demand. Interest is payable at 12% per annum. Also, on December 11, 2009, the Company entered into a $50,000 note with a shareholder/director. Interest is 5% per annum. The principal balance of the note is due on the earlier of December 11, 2012, or upon completion by the Company of equity financing in excess of $1.0 million in gross proceeds. Interest on the loan is payable on the maturity date at the rate of 5% per annum.

On June 1, 2010, the Company entered into a $50,000 convertible promissory note with a shareholder/director which shall be due and payable on June 1, 2013 and accrue interest at 8.0% per annum payable at maturity and which may be converted at any time into shares of common stock. The assignment of the conversion feature of the note resulted in a loan discount being recorded. The discount amount of $36,207 is being amortized over the original thirty-nine month term of the debt as additional interest expense. Amortization for this loan was $3,017 and $0 for the first quarter of 2011 and 2010.

On February 10, 2010, the Company entered into a $50,000 convertible promissory note with Wayside Ventures, LLC due on October 10, 2010. Interest is payable at 8% per annum. At anytime Wayside Ventures, LLC shall have the right to convert any unpaid portion of the note into shares of common stock prior to the maturity date. During the second quarter of 2010, Wayside Ventures, LLC converted the note into 344,828 shares of common stock.

On June 7, 2010, the Company entered into a $55,000 convertible promissory note with Asher Enterprises, Inc. due on December 8, 2011. Interest is payable at 8% per annum. At any time during the period beginning 120 days following the date of the promissory note until maturity, Asher Enterprises, Inc. shall have the right to convert any unpaid portion of the note into shares of common stock. The assignment of the conversion feature of the note resulted in a loan discount being recorded. The discount amount of $35,164 is being amortized over the original eighteen month term of the debt as additional interest expense. In the first quarter of 2011 Asher Enterprises converted the entire principal and accrued interest due on such note into 215,235 shares of common stock. Amortization expense of $1,439 was recorded for the first quarter of 2011 prior to conversion.

On December 3, 2010, the Company entered into a $33,000 convertible promissory note with Asher Enterprises, Inc. due on September 3, 2011. Interest is payable at 8% per annum. At any time during the period beginning 120 days following the date of the promissory note until maturity, Asher Enterprises, Inc. shall have the right to convert any unpaid portion of the note into shares of common stock. The assignment of the conversion feature of the note resulted in a loan discount being recorded. The discount amount of $27,000 is being amortized over the original nine month term of the debt as additional interest expense. In the second quarter of 2011 Asher Enterprises converted $15,000 of the principal due on such note into 68,182 shares of common stock. In the third quarter of 2011, Asher Enterprises converted the remaining $18,000 balance of such note and accrued interest of $1,320 into 93,650 shares of common stock.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. During the thee and nine months ended September 30, 2011, the Company incurred net losses of $946,000 and $2,078,000, respectively. In addition, at the quarter ended September 30, 2011 and year ended December 31, 2010, the Company has an accumulated deficit of $26,296,000 and $24,217,000, respectively. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

The Company’s continuation as a going concern is contingent upon its ability to obtain additional financing and to generate revenues and cash flow to meet its obligations on a timely basis. Management understands that sales revenues for the first nine months of 2011 and for 2010 were considerably less than earlier anticipated. As testing is either underway or completed with several potential new customers and in new areas with existing customers, management expects that sales should show significant increases in the latter part of 2011 and into 2012. A fire at our principal blender’s plant on October 3, 2011 has caused a delay in our ability to service some of our current and new customers until late in the fourth quarter of 2011. However, we do not expect this incident will have a material adverse effect on our operations. (See Note 11). We have been notified of the successful completion of testing for a large new international customer, who is currently ordering the required injection equipment and we expect we will be starting full implementation of EnerBurn in the first quarter of 2012. Also, G-2 Fuel Technologies, one of our marketing agents, has signed a supply contract with a large catalogue marketing group which is now scheduled to begin during the first quarter of 2012 as well.

In October 2009, the Financial Accounting Standards Board (FASB) issued an Accounting Standards Update (ASU) 2009-15, “Accounting for Own-Share Lending Arrangements in Contemplation of Convertible Debt Issuance or Other Financing.” This ASU requires that at the date of issuance of the shares in a share-lending arrangement entered into in contemplation of a convertible debt offering or other financing, the shares issued shall be measured at fair value and be recognized as an issuance cost, with an offset to additional paid-in capital. Further, loaned shares are excluded from basic and diluted earnings per share unless default of the share-lending arrangement occurs, at which time the loaned shares would be included in the basic and diluted earnings-per-share calculation. ASU 2009-15 became effective on January 1, 2010 and did not have an impact on the Company’s consolidated financial statements.

In December 2009, the FASB issued ASU 2009-16, "Accounting for Transfers of Financial Assets." This ASU amends prior accounting guidance to enhance reporting about transfers of financial assets, including securitizations, and where companies have continuing exposure to the risks related to transferred financial assets. The new guidance eliminates the concept of a “qualifying special-purpose entity” and changes the requirements for derecognizing financial assets. The new authoritative accounting guidance also requires additional disclosures about all continuing involvements with transferred financial assets including information about gains and losses resulting from transfers during the period. ASU 2009-16 became effective on January 1, 2010 and did not have an impact on the Company’s consolidated financial statements.

In December 2009, the FASB issued ASU No. 2009-17, “ Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities.” This ASU amends prior guidance to change how a company determines when an entity that is insufficiently capitalized or is not controlled through voting (or similar rights) should be consolidated. The determination of whether a company is required to consolidate an entity is based on, among other things, an entity’s purpose and design and a company’s ability to direct the activities of the entity that most significantly impact the entity’s economic performance. ASU 2009-17 requires additional disclosures about the reporting entity’s involvement with variable-interest entities and any significant changes in risk exposure due to that involvement as well as its effect on the entity’s financial statements. ASU 2009-17 became effective on January 1, 2010 and did not have an impact on the Company’s consolidated financial statements.

In January 2010, the FASB issued ASU 2010-06, “Fair Value Measurements and Disclosures (Topic 820) – Improving Disclosures About Fair Value Measurements.” This ASU requires expanded disclosures related to fair value measurements including (i) the amounts of significant transfers of assets or liabilities between Levels 1 and 2 of the fair value hierarchy and the reasons for the transfers, (ii) the reasons for transfers of assets or liabilities in or out of Level 3 of the fair value hierarchy, with significant transfers disclosed separately, (iii) the policy for determining when transfers between levels of the fair value hierarchy are recognized and (iv) for recurring fair value measurements of assets and liabilities in Level 3 of the fair value hierarchy, a gross presentation of information about purchases, sales, issuances and settlements. ASU 2010-06 further clarifies that (i) fair value measurement disclosures should be provided for each class of assets and liabilities (rather than major category), which would generally be a subset of assets or liabilities within a line item in the statement of financial position and (ii) companies should provide disclosures about the valuation techniques and inputs used to measure fair value for both recurring and nonrecurring fair value measurements for each class of assets and liabilities included in Levels 2 and 3 of the fair value hierarchy. ASU 2010-06 became effective on January 1, 2010 with the exception of the requirement to provide Level 3 activity of purchases, sales, issuances and settlements on a gross basis, which will become effective on January 1, 2011. Early adoption is permitted. The adoption of ASU 2010-06 as of January 1, 2010 did not have an impact on the Company’s consolidated financial statements. The adoption of the portion of ASU 2010-06 that becomes effective on January 1, 2011 is not expected to have an impact on the Company’s consolidated financial statements.

In April 2010, the FASB issued ASU 2010-17, "Revenue Recognition - Milestone Method" (Topic 605). This ASU codifies the consensus reached in EITF Issue No. 08-9, “Milestone Method of Revenue Recognition.” The amendments to the Codification provide guidance on defining a milestone and determining when it may be appropriate to apply the milestone method of revenue recognition for research or development transactions. Consideration that is contingent on achievement of a milestone in its entirety may be recognized as revenue in the period in which the milestone is achieved only if the milestone is judged to meet certain criteria to be considered substantive. Milestones should be considered substantive in their entirety and may not be bifurcated. An arrangement may contain both substantive and non-substantive milestones, and each milestone should be evaluated individually to determine if it is substantive.

ASU 2010-17 is effective on a prospective basis for milestones achieved in fiscal years, and interim periods within those years, beginning on or after June 15, 2010. Early adoption is permitted. If a vendor elects early adoption and the period of adoption is not the beginning of the entity’s fiscal year, the entity should apply 2010-17 retrospectively from the beginning of the year of adoption. Vendors may also elect to adopt the amendments in this ASU retrospectively for all prior periods. The Company does not expect the provisions of ASU 2010-17 to have an effect on its consolidated financial statements.

In August 2010, the FASB issued ASU 2010-21, “Accounting for Technical Amendments to Various SEC Rules and Schedules: Amendments to SEC Paragraphs Pursuant to Release No. 33-9026: Technical Amendments to Rules, Forms, Schedules and Codification of Financial Reporting Policies.” The Company does not expect the provisions of ASU 2010-21 to have an effect on its consolidated financial statements.

On October 3, 2011, a fire broke out at the Magna Blend Chemical plant in Waxahachie, Texas. Magna Blend has been the principal blending plant for our EnerBurn product and was the storage location of our entire stock of raw materials and finished goods inventory. Enerteck management has been informed by Magna Blend that the full replacement value of our inventory is covered under its insurance policy and that we will be fully reimbursed for our loss as soon as the insurance company completes its review of the fire. In the meantime, to insure that at least some of our new and smaller customers are serviced, one of our established customers has agreed to supply us with several drums of EnerBurn which were being held in their supply inventory. We will in turn replace these drums of chemical with new EnerBurn stock, as soon as the required raw material inventories can be acquired, blended and shipped back to their warehouses. This should be accomplished prior to the end of the fourth quarter. We do not expect this incident will have a material adverse effect on our operations.

When used in this report, the words “may,” “will,” “expect,” “anticipate,” “continue,” “estimate,” “intend,” “plans”, and similar expressions are intended to identify forward-looking statements regarding events, conditions and financial trends which may affect our future plans of operations, business strategy, operating results and financial position. Forward looking statements in this report include without limitation statements relating to trends affecting our financial condition or results of operations, our business and growth strategies and our financing plans.

Such statements are not guarantees of future performance and are subject to risks and uncertainties and actual results may differ materially from those included within the forward-looking statements as a result of various factors. Such factors include, among other things, general economic conditions; cyclical factors affecting our industry; lack of growth in our industry; our ability to comply with government regulations; a failure to manage our business effectively; our ability to sell products at profitable yet competitive prices; and other risks and factors set forth from time to time in our filings with the Securities and Exchange Commission.

EnerTeck Corporation (the “Company” or “EnerTeck Parent”) was incorporated in the State of Washington on July 30, 1935 under the name of Gold Bond Mining Company for the purpose of acquiring, exploring, and developing and, if warranted, the mining of precious metals. We subsequently changed our name to Gold Bond Resources, Inc. in July 2000. We acquired EnerTeck Chemical Corp. (“EnerTeck Sub”) as a wholly owned subsidiary on January 9, 2003. For a number of years prior to our acquisition of EnerTeck Sub, we were an inactive, public “shell” corporation seeking to merge with or acquire an active, private company. As a result of this acquisition, we are now acting as a holding company, with EnerTeck Sub as our only operating business. Subsequent to this transaction, on November 24, 2003 we changed our domicile from the State of Washington to the State of Delaware, changed our name from Gold Bond Resources, Inc. to EnerTeck Corporation and affected a one for 10 reverse common stock split. Unless the context otherwise requires, the terms “we,” “us” or “our” refer to EnerTeck Corporation and its consolidated subsidiary.

EnerTeck Sub, our wholly owned operating subsidiary, was incorporated in the State of Texas on November 29, 2000. It was formed for the purpose of commercializing a diesel fuel specific combustion catalyst known as EnerBurn (TM), as well as other combustion enhancement and emission reduction technologies. Nalco/Exxon Energy Chemicals, L.P. (“Nalco/Exxon L.P.”), a joint venture between Nalco Chemical Corporation and Exxon Corporation commercially introduced EnerBurn in 1998. When Nalco/Exxon L.P. went through an ownership change in 2000, our founder, Dwaine Reese, formed EnerTeck Sub. It acquired the EnerBurn trademark and related assets and took over the Nalco/Exxon L.P. relationship with the EnerBurn formulator and blender, and its supplier, Ruby Cat Technology, LLC (“Ruby Cat”).

We utilize a sales process that includes detailed proprietary customer fleet monitoring protocols in on-road applications that quantify data and assists in managing certain internal combustion diesel engine operating results while utilizing EnerBurn. Test data prepared by Southwest Research Institute and actual customer usage has indicated that the use of EnerBurn in diesel engines improves fuel economy, lowers smoke, and decreases engine wear and the dangerous emissions of both Nitrogen Oxide (NOx) and microscopic airborne solid matter (particulates). Our principal target markets have included the trucking, heavy construction, maritime shipping, railroad and mining industries, as well as federal, state and international government applications. We believe each of these industries shares certain common financial characteristics, i.e. (i) diesel fuel represents a disproportionate share of operating costs; and (ii) relatively small operating margins are prevalent. Considering these factors, management believes that the use of EnerBurn and the corresponding derived savings in diesel fuel costs can positively effect the operating margins of its customers while contributing to a cleaner environment.

We recorded $31,000 sales revenues for the three months, and $78,000 for the nine months ended September 30, 2011 compared to sales revenues of $33,000 sales revenues for the three months and $225,000 for the nine months ended September 30, 2010. The decrease in revenues for the three and nine months of 2011 compared to the prior year periods was primarily due to a sale to our oldest customer (Custom) in the previous year which did not reoccur this year.

In 2005, we appointed Custom, a subsidiary of Ingram Barge and which provides dockside and midstream fueling from nine service locations in Louisiana, Kentucky, Illinois, West Virginia, Missouri and Iowa, as our exclusive reseller of EnerBurn and the related technology on the Western Rivers of the United States, meaning the Mississippi River, its tributaries, South Pass, and Southwest Pass, excluding the Intra Coastal Waterway. Since 2006, sales have been sporadic with Custom but cumulatively since then Custom has been our largest customer to date. We cannot guarantee that we will ever generate meaningful revenues from our relationship with Custom.

As testing is either underway or completed with several potential new customers and in new areas with existing customers, more sales should occur. We have been informed by our distributor for Australia that testing has successfully been completed with a new large customer there and that implementation will start shortly. In addition, G2 Technologies, our new Certified Minority supplier and distributor, has advised us that several of its customers have started or will start using EnerBurn during the fourth quarter of 2011 and the first and second quarters of 2012. Delays caused by the loss of inventory due to the first will push back the initial installation of EnerBurn at certain of their customers. It is expected that sales should show significant increases in 2012.

Gross profit, defined as revenues less cost of goods sold, was $26,000 or 83.4% of sales for the three month ended September 30, 2011, compared to $24,000 or 72.7% of sales for the three month period ended September 30, 2010. For the nine months ended September 30, 2011, gross profit was 65,000 or 83.3% of sales compared to $186,000 or 82.6% of sales for the nine month periods ended September 30, 2010. In terms of absolute dollars, the decrease for the nine month period is a direct reflection of the obvious difference in sales volume for the two periods. As testing and sales negotiations are about to be completed with several new customers and in new areas with existing customers, more sales should occur. It is expected that sales should begin to show significant increases into 2012.

Operating expenses were $900,000 for the three months and $1,972,000 for the nine months ended September 30, 2011 as compared to $477,000 for the three months and $1,557,000 for the nine months ended September 30, 2010. Costs and expenses in all periods primarily consisted of payroll, professional fees, rent expense, depreciation expense, amortization expense and other general and administrative expenses. Such change from period to period of 2011 compared to 2010 was primarily due to stock based non cash compensation expense of $657,114 for the three months and $1,096,918 for the nine months ended September 30, 2011 compared to no such expense for the three and nine months ended September 30, 2010. This is offset somewhat by the end of the impairment expense write off for the Intellectual Property which was completed at year end 2010. Wages decreased to $174,000 for the three months and $540,000 for the nine months ended September 30, 2011 from $190,000 for the three months and $599,000 for the nine months ended September 30, 2010.

Other selling, general and administrative expenses decreased to $59,000 for the three months and $311,000 for the nine months ended September 30, 2011 from $131,000 for the three months and $492,000 for the three months and nine months ended September 30, 2010. Of the total $540,000 in wages for the first nine months ended September 30, 2011, $382,000 was not paid in cash during the period and was accrued to a later date when funds become available. While there has been a substantial increase in costs and expenses in recent years, it is felt that these increases will lead to a considerable increase in earnings potential in 2011 and future years.

Net income in the future will be dependent upon our ability to successfully service the large new accounts that have recently successfully completed testing in our new markets and new product lines and to increase revenues faster than we increase our selling, general and administrative expenses, research and development expense and other expenses. Our improved gross margin resulting from our manufacturing of our products should help us in our ability to hopefully become profitable in the future.

The majority of our marketing effort since 2005 has been directed at targeting and gaining a foothold in one of several major target areas, including the inland marine diesel market, trucking, heavy construction and mining. Management has focused virtually all resources at pinpointing and convincing certain large potential customers within these markets, with our diesel fuel additive product lines. While we still believe that this is a valid theory, the results, to date, have been less than we had expected. A substantial portion of 2010 was spent redirecting our marketing emphasis for our primary product, EnerBurn, to solidify our major customers and expanding to newer, more innovative areas. As such, we have created marketing alliances domestically and internationally with two new marketing groups, EnerGreen Technologies, based in Australia and G2 Fuel Technologies, a minority owned marketing firm working in both the domestic and foreign markets. This resulted in the signing of these marketing agreements have opened our marketing efforts to both private and publically held customers both within the United States and abroad, which appear to have significant sales potential over the remainder of 2011 and thereafter.

We fully expect sales to our current in house customers to grow over the next several months and we will continue to work with our other domestic and international customers as in the past. Working with EnerGreen, we are currently either in negotiations or currently testing with heavy construction and ocean going marine customers, both in Australia and in other international venues and expect to have several significant new customers over the next year and forward. G2 is currently heavily involved with federal, state and local government entities and are actively introducing EnerBurn and other Enerteck products to large new markets in those areas. The first municipal customer from this source has recently initiated the utilization of EnerBurn and testing when completed for this municipality should open new market for our products. In addition, G2 has since the close of the third quarter signed a contract with large new customer in the product distribution area for the general market. This customer, when fully implemented should greatly expand both the marketing and the distribution capabilities for our principal product, EnerBurn. This customer alone is expected to open our Enerteck products to a totally new customer base than previously targeted. G-2 is also actively marketing the product on an international basis and have negotiations are in process which should expand the market for EnerBurn in the coming year.

Net cash used in operating activities was $378,000 for the nine months ended September 30, 2011, which was primarily due to a net loss of ($2,078,000) and offset by common stock, warrants and options for services of $1,096,918, accounts receivable of $110,000, accounts payable of $71,000, accrued interest payable of $81,833 and accrued liabilities of $463,000. Net cash used in operating activities was $471,000 for the nine months ended September 30, 2010, which was primarily due to a net loss of ($1,420,000) offset by changes in accounts receivable of $46,000 and accrued liabilities of $431,000.

For the nine months ended September 30, 2011, we had net cash used by investing activities of $1,500 for capital expenditures compared to net cash used in investing activities of $332 for the nine months ended September 30, 2010. Cash provided by financing activities was $325,000 for the nine months ended September 30, 2011 due to proceeds from the sale of common stock of $50,000 and proceeds of stockholder notes and advances of $275,000 as compared to cash provided by financing activities of $505,000 for the nine months ended September 30, 2010 due to proceeds of stockholder notes and advances of $1,050,000 and proceeds from the sale of stock of $50,000 offset by payment of note payable for intellectual property of $500,000.

On July 13, 2006, we completed the acquisition of the EnerBurn formulas, technology and associated assets pursuant to an Asset Purchase Agreement executed as of the same date (the “EnerBurn Acquisition Agreement”) between the Company and the owner of Ruby Cat (the “Seller”). Pursuant thereto, the Company acquired from the Seller all of its rights with respect to the liquid diesel motor vehicle fuel additives known as EC5805A and EC5931A products (the “Products”) as well as its rights to certain intellectual property and technology associated with the Products (collectively, the “Purchased Assets”). The purchase price for the Purchased Assets was $3.0 million, payable as follows: (i) $1.0 million paid on July 13, 2006 in cash, and (ii) the remaining $2.0 million evidenced by a promissory note (the “Note”) bearing interest each month at a rate of 4.0% per annum, compounded monthly, and which shall be paid in four annual payments of $500,000 plus accumulated interest to that date on each anniversary of the closing until the entire purchase price is paid in full. All payments have been made and, as of July 2010, we have now completed our monetary obligations under the EnerBurn Acquisition Agreement. Through 2010 this obligation drew significantly on our cash reserves. Starting in 2011 this is no longer the case.

In the past, we have been able to finance our operations primarily from capital which has been raised. To date, sales have not been adequate to finance our operations without investment capital. Year to date through September 30, 2011, investment capital has provided $325,000 for working capital. For the year ended December 31, 2010, cash provided by financing activities was $688,000 from the proceeds of loans and advances made to the Company of $1,188,000, offset by payment on the note payable due on the intellectual property of $500,000.

We anticipate, based on currently proposed plans and assumptions relating to our operations, that in addition to our current cash and cash equivalents together with projected cash flows from operations and projected revenues we will require additional investment to satisfy our contemplated cash requirements for the next 12 months. No assurance can be made that we will be able to obtain such investment on terms acceptable to us or at all. We anticipate that our costs and expenses over the next 12 months will be approximately $3.0 million. Our continuation as a going concern is contingent upon our ability to obtain additional financing and to generate revenues and cash flow to meet our obligations on a timely basis. As mentioned above, management acknowledges that sales revenues have been considerably less than earlier anticipated. This was primarily due to a combination of circumstances which have been corrected or are in the process of being corrected and therefore should not reoccur in the future and the general state of the economy. Management expects that sales should show increases in 2012. No assurances can be made that we will be able to obtain required financial on terms acceptable to us or at all. Our contemplated cash requirements beyond 2011 will depend primarily upon level of sales of our products, inventory levels, product development, sales and marketing expenditures and capital expenditures.

EnerTeck Corporation, formerly Gold Bond Resources, Inc. was incorporated under the laws of the State of Washington on July 30, 1935. On January 9, 2003, the Company acquired EnerTeck Chemical Corp. ("EnerTeck Sub") as its wholly owned operating subsidiary. As a result of the acquisition, the Company is now acting as a holding company, with EnerTeck Sub as its only operating business. Subsequent to this transaction, on November 24, 2003, the Company changed its domicile from the State of Washington to the State of Delaware, changed its name from Gold Bond Resources, Inc. to EnerTeck Corporation.

EnerTeck Sub, the Company’s wholly owned operating subsidiary is a Houston-based corporation. It was incorporated in the State of Texas on November 29, 2000 and was formed for the purpose of commercializing a diesel fuel specific combustion catalyst known as EnerBurn (TM), as well as other combustion enhancement and emission reduction technologies for diesel fuel. EnerTeck’s primary product is EnerBurn, and is registered for highway use in all USA diesel applications. The products are used primarily in on-road vehicles, locomotives and diesel marine engines throughout the United States and select foreign markets.

Inventory consists of market ready EnerBurn plus raw materials required to manufacture the products. Inventory has been valued at the lower of cost or market, using the average cost method. That is the method used to show inventory on the current quarter ending schedules. Subsequent to the quarter closing on October 3, 2011, there was a major fire at the Waxahachie, Texas facilities of our primary chemical blending agent, Magna Blend. While our products and raw materials were not directly the cause of the fire, all of our raw materials for the production of our principal product, EnerBurn and finished good inventory of EnerBurn were lost. We have been informed by Magna Blend that all costs related to the replacement of our raw materials and finished good were fully covered and that we would be mae whole on this lost, shortly. Replacement raw materials have been ordered, however it is estimated that it will be early December before we can be back in full production. Arrangements have been made with our other blending agents to take over production at that time. In addition, one of our existing customers has agreed to do a like kind exchange of several drums of EnerBurn to allow us to begin servicing of some of our new and smaller customers until new product can be produced. At that time, this chemical will be replaced out of new production. Upon replacement of the raw material inventory we will return to using the average cost method for accounting for future inventory.

Included in inventory are injector systems and R & D Equipment amounting to $73,000. Testing of the PEX beta unit currently included in Other Inventory is scheduled to occur prior to the end of the fourth quarter of 2011. Based on the outcome of testing, it is fully expected that the company will be able to expand its marketing efforts to the environmental equipment market in a significant way.

Accounts receivable represent uncollateralized obligations due from customers of the Company and are recorded at net realizable value. This value includes an appropriate allowance for estimated uncollectible accounts to reflect any loss anticipated on the accounts receivable balances and charged to the provision for doubtful accounts. The Company calculates this allowance based on historical write-offs, level of past due accounts and relationships with and economic status of the customers. There was no allowance for doubtful accounts considered necessary at September 30, 2011.

Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is provided for on the straight-line or accelerated method over the estimated useful lives of the assets. The average lives range from five (5) to ten (10) years. Maintenance and repairs that neither materially add to the value of the property nor appreciably prolong its life are charged to expense as incurred. Betterments or renewals are capitalized when incurred.

The Company follows the provisions of FASB ASC 350, Goodwill and Other Intangible Assets. FASB ASC 350 addresses financial accounting and reporting for acquired goodwill and other intangible assets. Specifically, FASB ASC 350 addresses how intangible assets that are acquired should be accounted for in financial statements upon their acquisition, as well as how goodwill and other intangible assets should be accounted for after they have been initially recognized in the financial statements. The statement requires the Company to evaluate its intellectual property each reporting period to determine whether events and circumstances continue to support an indefinite life. In addition, the Company tests its intellectual property for impairment on an annual basis, or more frequently if events or changes in circumstances indicate that the asset might be impaired. The statement requires intangible assets with finite lives to be reviewed for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable and that a loss shall be recognized if the carrying amount of an intangible exceeds its fair value.

Intellectual property and other intangibles are recorded at cost. Prior to 2009, the Company determined that its intellectual property had an indefinite life because it believed there was no legal, regulatory, contractual, competitive, economic or other factor to limit its useful life, and therefore would not be amortized. For other intangibles, amortization would be computed on the straight-line method over the identifiable lives of the assets.

As a result of a review by management of its intangible asset and policies related thereto as of December 31, 2010, it was determined that a further impairment was required to be recorded. This impairment serves to reduce its intellectual property to an amount which management believes represents its fair value. This value would be considered a level 3 measurement under FASB ASC 820, Fair Value Measurements and Disclosures, since it is based on significant unobservable inputs. The Company will re-assess the value of this asset in future periods and make adjustments as considered necessary, rather than record additional amortization.

The Company will compute income taxes using the asset and liability method. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws. A valuation allowance is provided for the amount of deferred tax assets that, based on evidence from prior years, may not be realized over the next calendar year or for some years thereafter.

The current and deferred tax provisions in the financial statements include consideration of uncertain tax positions in accordance with FASB ASC 740, Income Taxes. Management believes there are no significant uncertain tax positions, so no adjustments have been reported from adoption of FASB ASC 740. The Company files income tax returns in the U.S. federal jurisdiction, and various state jurisdictions. The Company is no longer subject to income tax examinations by the Internal Revenue Service for years prior to 2007. For state tax jurisdictions, the Company is no longer subject to income tax examinations for years prior to 2006.

The accompanying financial statements are prepared in conformity with accounting principles generally accepted in the United States of America which require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act) as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of September 30, 2011, these disclosure controls and procedures were effective to ensure that all information required to be disclosed by us in the reports that we file or submit under the Exchange Act is: (i) recorded, processed, summarized and reported, within the time periods specified in the Commission’s rule and forms; and (ii) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

During the first quarter of 2011, we issued a total of 215,235 shares of our common stock to Asher Enterprises, Inc. in connection with the full conversion of a $55,000 convertible promissory note held by Asher and issued on June 7, 2010. The securities were issued in reliance upon the exemption from registration pursuant to Section 4(2) of the Securities Act of 1933, as amended, and/or Rule 506 there under.

During the second quarter of 2011, we issued a total of 68,182 shares of our common stock to Asher Enterprises, Inc. in connection with the conversion of $15,000 of the principal due on a $33,000 convertible promissory note held by Asher and issued on December 3, 2010. During the third quarter of 2011, Asher Enterprises converted the remaining $18,000 balance of such note and accrued interest of $1,320 into 93,650 shares of common stock. The securities were issued in reliance upon the exemption from registration pursuant to Section 4(2) of the Securities Act of 1933, as amended, and/or Rule 506 there under.

During the second quarter of 2011, we issued 60,000 shares of our common stock to an investor in connection with proceeds of $30,000 which had been advanced by such investor during the second quarter of 2009. On March 18, 2010 such investor signed the subscription agreement and was issued 60,000 shares of common stock in April 2011. The securities were issued in reliance upon the exemption from registration pursuant to Section 4(2) of the Securities Act of 1933, as amended, and/or Rule 506 there under.

During the third quarter of 2011, the Company granted 540,000 warrants to a director and his designee, 30,000 of which were issued in replacement of 30,000 warrants which expired in the second quarter of 2011 and 510,000 of which were issued in replacement of 510,000 warrants exercisable at $2.00 per share which were to expire in October 2012 and have been cancelled. All of the new warrants have an exercise price of $0.60 per share. An additional 250,000 warrants with the same exercise price were issued in the third quarter of 2011 to such director and another officer/director of the Company as and for additional consideration for previous loans to the Company. Also, in the third quarter of 2011, three of the four directors of the Company were each granted 250,000 warrants for services rendered which warrants are exercisable at $0.60 per share. All of the warrants have a term of five years.

During the third quarter of 2011, we sold to one accredited investor in a private placement offering 100,000 units at $0.50 per unit with each unit consisting of one share of our common stock and one common stock purchase warrant. Each warrant is exercisable into one share of common stock at $0.75 per share. These securities were sold directly by the Company, without engaging in any advertising or general solicitation of any kind and without payment of underwriting discounts or commissions to any person. The securities were issued in reliance upon the exemption from registration pursuant to Section 4(2) of the Securities Act of 1933, as amended, and/or Rule 506 there under.


31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rules 13a-14 and 15d-14 of the Exchange Act)

31.2		Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rules 13a-14 and 15d-14 of the Exchange Act)

32.1		Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)

101*		The following financial information from our Quarterly Report on Form 10-Q for the quarter ended September 30, 2011 formatted in Extensible Business Reporting Language (XBRL): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Cash Flows, and (v) Notes to Consolidated Financial Statements

* In accordance with Rule 406T of Regulation S-T, the XBRL information in Exhibit 101 to this quarterly report on Form 10-Q shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (“Exchange Act”), or otherwise subject to the liability of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

Delaware		47-0929885
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

10701 Corporate Drive, Suite 150 Stafford, Texas		77477
(Address of principal executive offices)		(Zip Code)

Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	o	Smaller reporting company	x

	ENERTECK CORPORATION
	(Registrant)

Dated: November 14, 2011	By:	/s/ Dwaine Reese
		Dwaine Reese,
		Chief Executive Officer
		(Principal Executive Officer)

Dated: November 14, 2011	By:	/s/ Richard B. Dicks
		Richard B. Dicks,
		Chief Financial Officer
		(Principal Financial Officer)

	Page

Consolidated Financial Statements (Unaudited):

Consolidated Balance Sheets		F-1

Consolidated Statements of Operations		F-2

Consolidated Statements of Cash Flows		F-3

Notes to Consolidated Financial Statements		F-4